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The Myth of Tort “Reform”

In recent years, we’ve all heard a lot of talk about a so-called “medical malpractice crisis” or “lawsuit abuse.” Various doctors and hospitals and their insurance companies argue that there are too many medical malpractice lawsuits, that many of these lawsuits are frivolous, and that these lawsuits drive up the cost of medical care significantly. All of these assertions are demonstrably false. The doctors, hospitals, and insurance companies have proposed (and successfully obtained in some unlucky states) the “cure” of limiting the amount of compensation that an injured patient can obtain. However, the evidence shows that this “cure” does not significantly affect the cost of health care. But, what it does do is to increase the already high profits of doctors, hospitals, and insurance companies, at the expense of patients injured by medical malpractice. Following is some literature detailing precisely how and why the so-called medical malpractice crisis is a sham:

Baker, T. The Medical Malpractice Myth. Chicago, IL: Univ. of Chicago Press; 2005. This highly informative book is written by a Professor of Law and Health Sciences at the University of Pennsylvania, who also has served as a consultant to insurance companies. The author investigates the allegations that frivolous medical malpractice lawsuits have caused malpractice premiums to skyrocket, doctors to leave the practice of medicine, juries to award excessive amounts to plaintiffs who have been egged on by greedy lawyers, and billions of dollars to be wasted on defensive medicine. He calls this the “Medical Malpractice Myth” and finds to be largely false:

Built on a foundation of urban legend mixed with the occasional true story, supported by selective references to academic studies, and repeated so often that even the mythmakers forget the exaggeration, half truth, and outright misinformation employed in the service of their greater good, the medical malpractice myth has filled doctors, patients, legislators, and voters with the kind of fear that short circuits critical thinking.

The author painstakingly shows that research by the medical industry itself establishes that the real problem is too much medical malpractice, not too much litigation. And despite the rhetoric of too many lawsuits, most malpractice victims do not sue. This means that the malpractice victims, and not doctors, hospitals, or insurance companies, bear most of the costs of medical malpractice. Those same studies by the medical industry show that the real costs of medical malpractice are the lost lives, extra medical expenses, time out of work, and pain and suffering of hundreds of thousands of people each year. Some key findings, backed up by exhaustive published research on the various topics, are:

Preventable medical mistake is one of the leading causes of death in the U.S.

There are between 7 and 25 serious medical malpractice injuries for every one medical malpractice lawsuit filed.

The number of medical malpractice lawsuits has remained stable when adjusted for population growth.

The size of medical malpractice jury verdicts has remained stable when adjusted for healthcare cost growth (an important component of damages in a medical malpractice lawsuit).

The cost for medical malpractice insurance, medical malpractice lawsuits, and the associated expenses is somewhere between 1 and 2 percent of total healthcare expenses, and thus is not an important factor in the high cost of health care.

There is little proof of so-called “defensive medicine.”

It is the insurance industry “underwriting cycle,” and not malpractice lawsuit payouts, that cause insurance company profits and malpractice insurance premiums to rise and fall.

Medical liability insurance “crises” are not caused by sudden or dramatic increases in malpractice settlements or jury verdicts. Rather, they are caused by the insurance industry systematically under-reserving in the years leading up to the “crisis,” accompanied by “herding” behavior among insurance companies competing to sell insurance.

The legal system does a good job of weeding out weak malpractice claims. Weak claims are usually brought because the patient has been unable to obtain information or answers from his or her healthcare provider. If information obtained during a lawsuit shows that the medical care actually was good, the lawsuit usually is dropped by the patient.

For medical malpractice cases that actually go to trial, defendants are more likely to win than are plaintiffs.

When plaintiffs do win, juries follow the jury instructions and award damages based on the actual injuries to plaintiff, not on the “deep pockets” of the doctors and hospitals and their insurance companies.

Doctors and hospitals and their insurance companies put up a strong fight even in cases where they know that the plaintiff should win, and they rarely pay anything if they think that the doctor did nothing wrong.

Insurance claims files show that insurance companies only very rarely pay weak claims, and when they do, the amount paid is only a small fraction of the claimed damages.

Medical malpractice lawsuits increase knowledge about the extent of medical mistakes and injuries, with the beneficial result of stimulating more studies on medical injuries and more efforts to curb medical injuries.

Medical malpractice lawsuits improve patient safety by motivating healthcare providers to improve their safety practices to avoid lawsuits and to reduce their insurance premiums. As an example, the American Society of Anesthesiologists (“ASA”) was tired of the high malpractice rates and accompanying high malpractice insurance premiums of its members, and so it decided to investigate the problem. It attempted to gather every malpractice claim ever filed in connection with anesthesia care. It then analyzed those claims and found that over one-third of the claims came from “adverse respiratory events” that were preventable. Rather than hide from that information, the ASA backed the development of new practice guidelines and better anesthesia equipment. As a result, anesthesia safety dramatically improved and anesthesia malpractice lawsuits and insurance premiums dramatically fell.

Medical malpractice lawsuits help injured patients by providing them compensation that they need and deserve.

Medical malpractice lawsuits promote traditional American values like justice and responsibility. Lawsuits are the only way that powerful medical interests can be held accountable for their wrongs.

There is no evidence that the threat of medical malpractice lawsuits discourages the disclosure of errors. The available evidence supports the opposite conclusion.

Malpractice lawsuits probably do to some extent cause doctors to practice “defensive medicine.” However, there is no way to distinguish between “good” defensive medicine caused by malpractice lawsuits (which helps prevent injuries) and “bad” defensive medicine (that does not help prevent injuries but instead merely wastes money). In the few research studies where “bad,” money-wasting effects of defensive medicine have been found, its effects on healthcare costs are very small and have been negated by the increased cost-consciousness of the managed care movement.

“Tort reform” (that is, limiting the compensation available to victims of medical errors) has no effect on healthcare costs. The U.S. Congressional Budget Office (in line with other research) has “found no effect of tort controls on medical spending,” and has concluded that there would be no cost savings from any reduction in defensive medicine.

Doctors generally do not retire or leave a state because of malpractice lawsuits. As in any other walk of life, they do so for personal reasons. There is no good evidence that malpractice lawsuits have affected any patient’s access to care. Shortages of doctors, where they exist, come from rapid population growth in some parts of the country, from a lack of health insurance and other problems that disproportionately affect rural areas and the poor, and from long-standing efforts by policy-makers to restrict the supply of doctors.

Research suggests that tort reform does not improve healthcare outcomes. If anything, the research suggests that some kinds of tort reforms might have a detrimental effect on healthcare outcomes, because by protecting negligent doctors and hospitals, it limits the injury-prevention effect of malpractice lawsuits.

Public Citizen. The Great Medical Malpractice Hoax – NPDB Data Continue to Show Medical Liability System Produces Rational Outcomes. Jan. 2007. This report found that claims of a medical malpractice crisis are largely false and that the real crisis is in patient safety. Although President Bush asserted in 2006 that “lawsuits are driving many good doctors out of practice,” statistics published by the American Medical Association (“AMA”) show that the number of practicing physicians is growing faster than the population. (Id. at 1.) President Bush claimed that medical malpractice lawsuits send physicians’ malpractice insurance premiums “skyrocketing,” but recent news reports reveal that medical malpractice insurers are making huge profits. (Id.) In Florida, one of the AMA’s “crisis” states, the Office of Insurance Regulation reported that the 15 largest medical malpractice insurers saw profits of $803 million in 2005. “It is clear that this call for limits on the ability of injured patients to seek redress in court is just one piece of a larger effort by the business lobby to protect businesses from being held accountable when they recklessly or negligently hurt people.” (Id.)

Overall, the data show that President Bush is misdiagnosing the healthcare problem. The court-based compensation system is, on the whole, a rational one that provides money for valid claims and dismisses invalid ones. These findings are confirmed by other research, including a recent study conducted by researchers from the Harvard School of Public Health in which the authors found that “portraits of a malpractice system that is stricken with frivolous litigation are overblown,” going on to note that “the malpractice system performs reasonably well in its function of separating claims without merit from those with merit and compensation the latter.” [Fn. omitted.]

(Id. at 1.)

Key Findings:

Medical malpractice payments are actually declining.

Payments correspond to severity of injury, as they should.

Patient safety is the real crisis.

Improving patient safety will save lives.

White C, Hagen S. Medical Malpractice Tort Limits and Health Care Spending. Congressional Budget Office. Apr.2006. The U.S. Congressional Budget Office investigated the effect of tort reforms on healthcare costs and found that the relationship between tort reforms and healthcare spending are “inconsistent” and “mixed.” (See id. at 1.) The CBO concluded that tort reforms are sometimes associated with higher health spending, sometimes lower spending, and sometimes no effect on health spending. (Id. at 3.) Overall, “The estimated effect of implementing a package of … proposed tort limits is near zero.” (Id.)

Beider P, Hagen S. Limiting Tort Liability for Medical Malpractice. Congressional Budget Office. Jan.2004. The U.S. Congressional Budget Office evaluated the effect of tort reform on “defensive medicine” and overall healthcare costs. It noted that limits on malpractice liability “can indeed reduce total awards and thereby lead to lower premiums for malpractice insurance,” but “such changes do not effect economic efficiency: they modify the distributions of gains and losses to individuals and groups but do not create benefits … for society as a whole.” (Id. at 5.) In other words, “tort reform” and other limits on malpractice lawsuits make doctors, hospitals, and insurance companies richer, at the expense of malpractice victims who are denied full recovery (or at times any recovery at all), without resulting in any overall gain to society as a whole. The Congressional Budget Office also concluded that:

Proponents of limiting malpractice liability have argued that much greater savings in health care costs would be possible through reductions in the practice of defensive medicine. However, some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients. On the basis of existing studies and its own research, CBO believes that savings from reducing defensive medicine would be very small.

(Id. at 6; emphasis added.) In other words, the extra tests and procedures that doctors order are more a result of their wanting to make more money by performing and charging for more services, than a result of their concerns about malpractice liability, and in any event, savings from reducing defensive medicine would be “very small.”

Public Citizen. No Correlation – Continued Decrease in Medical Malpractice Payments Debunks Theory That Litigation Is to Blame for Soaring Medical Costs. Public Citizen’s Congress Watch; Washington, D.C. Aug. 2013. This report by Public Citizen investigated whether medical malpractice payments were a significant driver of the increases in healthcare costs and whether restrictions on medical malpractice lawsuits would bring the cost of healthcare down. It found that malpractice litigation was not a significant driver of healthcare costs and that restrictions on medical malpractice lawsuits in fact have not brought down the cost of healthcare. Since 2003, medical malpractice payments have fallen by 28.8%, but the cost of healthcare has increased 58.3% during that same time period.

Public Citizen. Medical Malpractice Payout Trends 1991-2004 – Evidence Shows Lawsuits Haven’t Caused Doctors’ Insurance Woes. April 2005. This study is based on the U.S. Department of Health and Human Services National Practitioner Data Bank (NPDB) and shows that the medical malpractice system is working well. Adjusted for population growth, the number of medical malpractice claims has fallen by 9.2% since 1991. (Id. at 2.) The total inflation-adjusted value of payouts has been flat since 1991. (Id. at 3.) The inflation-adjusted number of payments over $1 million has declined 56% since 1991; only 1% of payouts exceed $1 million (inflation-adjusted base year 1991). (Id. at 5.) The medical liability system is not one of “jackpot” justice in which patients go to court and score big awards based on flimsy claims. (Id. at 1.) Instead, the evidence shows that the system is working as designed: those with minor injuries receive little compensation, while the great bulk of malpractice awards are for cases involving major, debilitating injuries or death. The amount of malpractice payments generally matches the degree of harm. (Id. at 6.) Most kinds of common, preventable medical errors have increased over time. (Id. at 8.) Five and one-half percent of doctors are responsible for 57.3% of medical malpractice payouts. (Id. at 9.) Doctors with repeated malpractice payouts suffer few consequences. (Id. at 10.) Only 8.3% of doctors with 2 or more medical malpractice payouts have been disciplined by their state medical board. Only 17.8% of doctors with 5 or more medical malpractice payouts have been disciplined, and only 32.5% of doctors with 10 or more medical malpractice payouts have been disciplined. (Id. at 10.) One physician with 30 malpractice payouts was not disciplined by the state medical board, another with 21 payouts was not disciplined, and so forth. (Id. at 11-12.)

Our results are striking. Not only do we show that real average awards have grown by less than real income over the 40 years in our sample, we also find that essentially all of this growth can be explained by changes in observable case characteristics and claimed economic losses (particularly claimed medical costs)…. Rising … medical costs appear to be one of the most important factors driving increases in jury verdicts.

In other words, there are no “skyrocketing” jury verdicts. The size of jury verdicts has increased less than increases in real income, and those modest increases are caused by the increased medical costs rightfully being reflected in the jury verdicts.

Studdert D, Mello M, Gawande A, et al. Claims, errors and compensation payments in medical malpractice litigation. N Engl J Med. 2006; 354;19:2024-2033. In this study, trained physicians reviewed 1,452 closed malpractice claims from five liability insurers to determine whether a medical injury had occurred and, if so, whether it was due to medical error. The study found that 97% of the medical malpractice lawsuits showed harm caused by medical treatment. Sixty-three percent were caused by medical error, but only 56% received compensation. For most of the claims where there were no errors or medical injuries, there was no compensation. The study concluded that (1) “portraits of a malpractice system that is stricken with frivolous litigation are overblown”; (2) “the malpractice system performs reasonable well in its function of separating claims without merit from those with merit and compensating the latter”; (3) it is “troubling” that of the claims involving medical error, 17% of them received no payment; (4) “failure to pay claims involving error adds to a larger phenomenon of underpayment generated by the vast number of negligent injuries that never surface as claims.” (Id. at 2031.)

Public Citizen. Defensive Medicine: The Doctored Crisis. Public Citizen’s Congress Watch; Washington, D.C. (Mar. 2013). This report investigated the true cost of “defensive medicine.” It found that despite claims that defensive medicine cost 26% of healthcare spending, the true cost of defensive medicine amounted to a miniscule 1-2% of total healthcare costs, based on the evidence. The financial incentives accruing to the benefit of doctors in ordering more tests and performing more procedures was a better explanation for many medical practices that tort reform advocates have deemed defensive medicine. The principal type of defensive medicine is diagnostic testing, yet those costs have been decreasing and they are a small proportion of overall healthcare costs. Thus, defensive medicine cannot be driving the increase in healthcare costs.

U.S. Congressional Research Service – Domestic Social Policy Division, Peterson C, Burton R. U.S. Health Care Spending: Comparison with Other OECD Countries. Sept.2007. One of the true drivers of high U.S. healthcare cost is the high cost of U.S. physicians, who earn twice as much as the median of their international compatriots. (Id. at CRS-18, 59.) Other causes are the high costs in the U.S. for medical procedures, pharmaceuticals, and health administration and health insurance, when compared to other advanced economies. (Id. at CRS-18-22; 29.)

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